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U.S. retail sales rise for third month but slowdown expected

WASHINGTON — Americans increased their spending at retail stores and restaurants in July for a third straight month, but some evidence suggests that sales are weakening with the expiration of government rescue aid that had previously put more money in people’s pockets.

Friday’s report from the Commerce Department showed that retail purchases rose by a seasonally adjusted 1.2 percent last month. The gains of the past three months have now restored retail purchases to their levels before they plunged in March and April when the pandemic shuttered businesses and paralyzed the economy.

Yet with Americans’ overall income now likely shrinking, economists expect spending to slow further. July’s sales increase was much smaller than May’s 18.3 percent gain and June’s 8.4 percent increase, when shoppers flocked to newly reopened businesses. In July, the viral outbreak resurged in much of the nation, forcing some businesses to shut down again.

Sales at restaurants and bars grew 5 percent last month after much more robust increases of more than 30 percent in May and 27 percent in June. Restaurant and bar revenue remains about one-fifth below its levels of a year ago.

Solid sales gains were posted last month at electronics and appliances stores, reflecting the needs of mostly higher-income people who are now working from home. Purchases at clothing stores, gas stations, and drugstores also rose. Furniture sales were flat after a huge gain in June.

The problem now is that roughly 28 million laid-off workers are no longer receiving a $600-a-week federal unemployment check that they had received in addition to their state benefit but that lapsed last month. In addition, a $1,200 stimulus check that was sent to many Americans in April and May likely won’t be repeated. Negotiations in Congress on a new economic relief package have collapsed.

Many retailers have said the supplemental unemployment aid had helped spur sales of clothes and other nondiscretionary items in the spring and early summer.

Consumers had started to cut back on spending in late July, according to a GlobalData survey, and spending fell sharply in the first week of August. Many consumers are spending more around the home and on recreational equipment while still maintaining a nervous outlook.

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